U.S. CitiesCity-Data Forum Index
Go Back   City-Data Forum > General Forums > Economics
 [Register]
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
View detailed profile (Advanced) or search
site with Google Custom Search

Search Forums  (Advanced)
Reply Start New Thread
 
Old 04-05-2018, 01:04 PM
 
Location: Paranoid State
12,662 posts, read 9,420,097 times
Reputation: 14916

Advertisements

Quote:
Originally Posted by BMI View Post
Manufacting goes to where the cheap labor is...
It is more accurate to say "some" manufacturing goes to where the cheap labor is. Maybe even most. But certainly not all. Some manufacturing goes to where the taxes aren't.

Take the manufacturing of semiconductor chips. The modern microprocessor, with over 18 Billion transistors grown on a slice of silicon about the size of your thumbnail, is arguable the most complex thing ever invented or manufactured in the history of mankind. That a microprocessor actually works is only about this far >< away from magic, where any sufficiently advanced technology is indeed indistinguishable from magic. Indeed, during the manufacturing process, lots of them fail to work - and we usually don't know why.

The jobs in microprocessor manufacturing factories are good, high paying jobs. Employees typically have PhDs in chemistry, solid state physics, materials science, electrical engineering, mechanical engineering, chemical engineering, industrial engineering, photolithography, etc.

Even with those high paid employees, the cost of labor isn't even a rounding error in the financials of manufacturing a microprocessor -- they are swamped by the capital, infrastructure and consumables costs -- and cost of taxes.

Let me back up a bit.

When you build a Wafer Fab (a factory that manufactures semiconductors such as microprocessors on wafers about the size of a dinner plate; that 300 mm diameter wafer is later cut into individual components called "die"), you start with raw land, and you invest about $6+ Billion and pray there is a market for the microprocessors it will begin producing about 3-4 years from now. Oh - that $6 Billion factory will be obsolete 5 years after it begins production. So a company is usually "betting the farm" on that factory decision.

Once the factory is obsolete, you rarely attempt to retrofit it (because it turns out doing so is very hard); usually you just build a new factory from scratch, repeating the cycle. In the old factory, you probably keep making those older generation microprocessors as long as you can find someone to buy them - and demand trails off over a few years.

Once the physical factory is built, you outfit it with the "toolset" - all the semiconductor manufacturing equipment (billions and billions of dollars worth) and of course you buy all the factors of production (silicon ingots, chemicals, pure elements, gases, rare earth metals, precious metals, etc -- billions of dollars worth).

When you select a site for a major semiconductor manufacturing plant, you need access to an educated workforce, lots of water, clean & clean electric power, a reliable transportation system, you need a stable political environment, a stable social environment, a modern system of environmental protection, a well-developed legal environment (including protection of intellectual property), etc etc etc. Any nation or state that wants a fab knows that fab is like a marquis tenant in a shopping mall, and most are eager to attract one.

So, since manufacturing labor is "in the noise" and the site selection and operation is not sensitive to wages paid to the employees, what does matter?

One of the key elements of the list of criteria is money. Building a fab is expensive and risky. It is up to The State to determine its incentive package, of which tax incentives are front and center.

Money is fungible, of course - so if a governmental is unable to contribute via tax incentives, it may instead provide water and electricity at reduced rates to achieve the same $$ value and result. Decades ago the State of Texas gave as an incentive to Apple something like 1 Million free credits at the University of Texas at Austin as part of its incentive package. That is worth quite a bit.

In the case of the State of Israel, Israel gave cash in addition to incentives such as tax holidays to Intel to build a fab. It was many hundreds of millions of dollars. Note that the USA gives many billions to Israel, which in turn gave over 10% to Intel to locate a fab there. If you were a cynic, you would say we US citizens pay federal income taxes to IRS (Treasury), and cash flows from there to Israel, and then to Intel so Intel will export some of our own high-paying jobs to Israel. But none of us are cynics.

Thus, tax policy frequently is almost always the the major consideration for site selection. Intel had done an analysis of the cost of building and operating a Fab in the USA vs offshore (this was prior to the recent tax overhaul). The difference was about $1 Billion. Essentially all of that was US taxes. I haven't seen an analysis done of the difference including the recent tax overhaul.

Beyond taxes, there is also the inevitable "immune system response" to building a Wafer Fab. Environmental nutjobs come out of the woodwork looking for something -- anything -- to scuttle the project. In New Mexico a few years ago, regulators required the water coming out of the plant -- water used in the manufacturing process -- to be 100% pure water and nothing but water. H2O and only H2O Clearly these regulators were not chemists. Intel argued that was stupid, but ultimately just saluted and said "Yes, Sir."

Anyone who passed college level Chem 101 could forecast the result. Absolutely pure water -- so-called '18 megaohm' water (it is called that because pure water is an insulator, not a conductor of electricity) is not a good thing to put into the environment. Eventually, after the wafer fab was in operation for a while, regulators learned enough to allow Intel to put out water that mimics the chemistry of the local environment. So, Intel cleaned the water to be as pure as technically feasible at the time, and then "dirtied it up" with minerals so it was essentially the same as the input water.

Last edited by SportyandMisty; 04-05-2018 at 01:14 PM..
Reply With Quote Quick reply to this message

 
Old 04-05-2018, 03:43 PM
 
2,135 posts, read 1,149,266 times
Reputation: 4368
Yeah no doubt labor plays a role in our job loss. More so for easily substituted things like call centers, coding etc.

When you start talking about making things, really making things, the costs are in engineering, capital expenditures, environmental impacts, legal, etc and that is where the third and fourth world really shine. That is where much of the costs are reduced.

Also, it isn't just about costs now vs say some other **** hole that might be cheaper. Asia has 4.5b people on it. They are going to drive economic markets for the foreseeable future. If the 300m or so folks living in the United States don't like that, well go **** yourself because that is reality.

Naturally as a result of that, much of the Earth's economic boom, resources, manufacturing, shipping etc is going to center there.
Reply With Quote Quick reply to this message
 
Old 04-06-2018, 08:46 AM
 
Location: Silicon Valley
2,744 posts, read 1,207,954 times
Reputation: 5039
Sporty, part of the reason wafer fab production stayed for so long was because of legal restrictions against exporting it. Any country would love to roll out a million reasons for a company to shift where it goes. Several years ago had a buddy that was in town here surprisingly and meeting with some of the big companies addressing their need to better secure their IP to keep it from Corporate espionage.

The reality is the government has been developing a framework for awhile of who and how trade secrets are moving to China. 2025 is most pugnacious in that it seems to be a trophy case of stolen IP. Lots of ways the endgame could work.
Reply With Quote Quick reply to this message
 
Old 04-06-2018, 01:49 PM
 
Location: Ohio
17,986 posts, read 13,233,625 times
Reputation: 13765
Quote:
Originally Posted by Supposn View Post
Ichoro & Artillery77, I'm among the proponents of USA adopting the trade policy described within Wikipedia's “Import Certificates” article. It would if not entirely eliminate, significantly reduce USA's chronic annual trade deficits of goods.
Your wiki article is fatally flawed. The US trade deficit with China was only $375 Billion in 2017, which is less than 2% of US GDP. The actual amount of the Chinese goods imported in 2017 was $505 Billion.

If that $505 Billion worth of imports generates $600 Billion in GDP, then not only have you wiped out and negated the trade deficit, you're $95 Billion on the plus side.
Reply With Quote Quick reply to this message
 
Old 04-20-2018, 10:26 PM
 
1,025 posts, read 558,839 times
Reputation: 300
Quote:
Originally Posted by Mircea View Post
Your wiki article is fatally flawed. The US trade deficit with China was only $375 Billion in 2017, which is less than 2% of US GDP. The actual amount of the Chinese goods imported in 2017 was $505 Billion.

If that $505 Billion worth of imports generates $600 Billion in GDP, then not only have you wiped out and negated the trade deficit, you're $95 Billion on the plus side.
Mircea, it's of no consequence to reduce or eliminate our trade deficit with China, if that deficit will be replaced by increased trade deficits with other nations.

A positive balance, (i.e. a trade surplus) contributes, and a negative balance, (i.e. a trade deficit) reduces their nation's GDP; those are facts rather than an opinion.
The nation's GDP is a statistic based on what we can account for or at least reasonably estimate with some confidence; it's based upon the relative values of the nation's imports and exports.
In actuality (we should know), that the nation's net global balance trades' affects upon their nation's economy substantially exceeds that net balance amount.

The prices of globally traded products do not reflect production supporting goods and services that were provided to those goods producers. To the extent that occurs among the nation's globally traded goods, global trade's effect upon Their nation's economy exceeds the extent of the nation's net balance of trade.
Although all of a nation's production is captured within the GDP statistic, domestic production support that's not reflected within the prices of globally traded products cannot be recognized and attributed to global trade.

Economies of scale is not limited to manufacturing mass production; it can occur within the production of most goods and service products. When imports crowd out USA products with steel components, there's a smaller potential market for USA's steel, which reduces our steel production, which increases costs of USA steel per ton, which further reduces USA producers USA products with steel components.
Also consider that similar scenarios are being played out within many domestic enterprises that are not in a steel-producing or consuming industry, but are dependent upon sales to such enterprises.
The secondary reduction of GDP due to these inter-relationships of enterprises that more often seem unrelated to global trade are not calculated or estimated.

USA's chronic annual trade deficits are substantially net detrimental to our nation's GDP and drag upon our numbers of jobs.

Respectfully, Supposn
Reply With Quote Quick reply to this message
 
Old 04-20-2018, 10:37 PM
 
3,526 posts, read 1,985,593 times
Reputation: 6109
Trade wars are a tax on the american consumer. There is no american alternative in almost all applied tariffs.
Reply With Quote Quick reply to this message
 
Old 04-20-2018, 10:43 PM
 
6,058 posts, read 2,492,570 times
Reputation: 3876
Quote:
Originally Posted by Thatsright19 View Post
Honestly?

Trump is doing an excellent job of showing the world why the dollar system is broken and his idiotic actions will only serve to highlight the urgency of transitioning the world away from the dollar.

Not to mention, I get pretty worried when the representatives of the people, the congress, continue to give shoved aside. Yet another step towards an imperial presidency. With the U.s military and an attitude that seems to be hell bent on economic ware fare, that’s a bad scenario for the world.
We have been at war since sometime in the 80's, its just that now the average american is backed up against a wall (COL vs wages just keep getting worse) and so we have decided to fight back.

Its only a bad scenario for the filthy rich and certian countries outside the USA. Red blooded real americans will only have a brief period of pain and then we will dominate again. Even if we have to retaliate with physical war fare by blowing up chineese factories built by american companies to force others to buy from us.

People like you who are scared wienies will have to go hide.
Reply With Quote Quick reply to this message
 
Old 04-20-2018, 10:45 PM
 
6,058 posts, read 2,492,570 times
Reputation: 3876
Quote:
Originally Posted by SWFL_Native View Post
Trade wars are a tax on the american consumer. There is no american alternative in almost all applied tariffs.
Negitive, if the tax is set high enough the consumer will stop consuming and then the onus is shifted to the real target, treasonous american mega corps and the government of China.

Since in the USA we have such a system where we cant just go in with the SS and bring CEO's/majority share holders out in shackles and throw them in death camps we have to play a more sophisticated game.
Reply With Quote Quick reply to this message
 
Old 04-20-2018, 10:52 PM
 
6,058 posts, read 2,492,570 times
Reputation: 3876
Quote:
Originally Posted by Supposn View Post
Mircea, it's of no consequence to reduce or eliminate our trade deficit with China, if that deficit will be replaced by increased trade deficits with other nations.

A positive balance, (i.e. a trade surplus) contributes, and a negative balance, (i.e. a trade deficit) reduces their nation's GDP; those are facts rather than an opinion.
The nation's GDP is a statistic based on what we can account for or at least reasonably estimate with some confidence; it's based upon the relative values of the nation's imports and exports.
In actuality (we should know), that the nation's net global balance trades' affects upon their nation's economy substantially exceeds that net balance amount.

The prices of globally traded products do not reflect production supporting goods and services that were provided to those goods producers. To the extent that occurs among the nation's globally traded goods, global trade's effect upon Their nation's economy exceeds the extent of the nation's net balance of trade.
Although all of a nation's production is captured within the GDP statistic, domestic production support that's not reflected within the prices of globally traded products cannot be recognized and attributed to global trade.

Economies of scale is not limited to manufacturing mass production; it can occur within the production of most goods and service products. When imports crowd out USA products with steel components, there's a smaller potential market for USA's steel, which reduces our steel production, which increases costs of USA steel per ton, which further reduces USA producers USA products with steel components.
Also consider that similar scenarios are being played out within many domestic enterprises that are not in a steel-producing or consuming industry, but are dependent upon sales to such enterprises.
The secondary reduction of GDP due to these inter-relationships of enterprises that more often seem unrelated to global trade are not calculated or estimated.

USA's chronic annual trade deficits are substantially net detrimental to our nation's GDP and drag upon our numbers of jobs.

Respectfully, Supposn
This is all flim flam code for, we as america wont do what it takes to retaliate the economic warfare that has been levied on us with cruise missile strikes on american company factories in China who sold out their own people.

These sorts of posts are disengenuous and over complicate a very simple issue.

After we blew up some major factories and all of Chinas war making capabilities and then blockaded them they would learn real quick who the big boy is. We could wipe out their navy and most manufacturing over night leaving them crippled and then blockade them and starve out their people.

But we wont because we are weak. When the american people get hungry enough and tired enough of the crap it will happen, but by then it might be too late, if we keep letting this go on China will have the means to defend themselves and that will be a very big problem. I guess at that point it will just be a total war. People are not just going to sit around and work their fingers to the bone to fight a loosing economic battle, at a ceritan point it will be time for physical warfare.
Reply With Quote Quick reply to this message
 
Old 04-20-2018, 10:57 PM
 
6,058 posts, read 2,492,570 times
Reputation: 3876
Quote:
Originally Posted by aridon View Post
Yeah no doubt labor plays a role in our job loss. More so for easily substituted things like call centers, coding etc.

When you start talking about making things, really making things, the costs are in engineering, capital expenditures, environmental impacts, legal, etc and that is where the third and fourth world really shine. That is where much of the costs are reduced.

Also, it isn't just about costs now vs say some other **** hole that might be cheaper. Asia has 4.5b people on it. They are going to drive economic markets for the foreseeable future. If the 300m or so folks living in the United States don't like that, well go **** yourself because that is reality.

Naturally as a result of that, much of the Earth's economic boom, resources, manufacturing, shipping etc is going to center there.
Not if we have WW3
Reply With Quote Quick reply to this message
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.

Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.


Reply
Please update this thread with any new information or opinions. This open thread is still read by thousands of people, so we encourage all additional points of view.

Quick Reply
Message:


Over $104,000 in prizes was already given out to active posters on our forum and additional giveaways are planned!

Go Back   City-Data Forum > General Forums > Economics
Follow City-Data.com founder on our Forum or

All times are GMT -6.

© 2005-2018, Advameg, Inc.

City-Data.com - Archive 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35 - Top